If You're Not Excited About Coal, You're Not Watching

I've been on this topic a lot lately. But thermal coal continues to shape up as one of the most exciting stories of 2014.

Last week came more confirmation. From heavyweight coal importer India.

Industry analysts India Coal Market Watch reported that imports are continuing to rise at an unbelievable pace. In the seven months from April to October, total thermal coal shipments into India jumped 28%.

That equates to a year-on-year increase of about 18 million tonnes. Annualizing that seven-month figure, India's imports are on pace to grow by over 30 million tonnes for the current fiscal year.

These numbers imply that India's full-year imports could approach 140 million tonnes. A phenomenal number, when you consider that imports in fiscal 2011 came in at just under 50 million tonnes.

That's a lot of growth in just a few years.

This should firmly place India as the world's number two coal importer. Well ahead of major consumers like Japan and South Korea. Who will probably see imports of 100 to 110 million tonnes on the year.

India's shipments are now even challenging the world's number one coal importer: China. Whose total imports this year should be around 150 million tonnes.

And demand from all of the other big Asian consumers isn't slacking. Which begs the question: where is supply coming from to meet India's explosive demand?

Not Australia--the most important thermal coal supplier to Asia. Exports here are forecast to grow by just 13 million tonnes this year.

The answer appears instead to be Indonesia. Whose exports grew by 32 million tonnes year-on-year for the January to June 2013 period (the most recent data we have, at the moment).

This seems to suggest that Indonesian supply might be able to meet growing Indian demand.

But there's a catch. Indonesian coal is very low quality. Evidenced by utilities in China recently turning away from Indonesian supply, in favour of higher-quality coals.

If India is forced to make a similar move, things could get tight very fast. We'll see how this supply-demand chessboard plays out.

Here's to a lot of new tonnes,

By. Dave Forest